Paddy Power Betfair Seeks to Reverse `Painful' Cheltenham Loss

(Bloomberg) -- Paddy Power Betfair Plc is seeking to get even with bettors at next week's Cheltenham Festival after the U.K. betting industry incurred record losses at last year's edition of the storied horse-racing event.

“Hopefully from a results perspective it's very different,” Chief Executive Officer Breon Corcoran said by phone after the company reported that full-year earnings rose 35 percent but online gaming softened, hurting the shares. “We lost 20 million pounds ($24 million) in Cheltenham last year, and we're hoping for nothing as painful as that this year.”

Cheltenham week is the biggest of the year for Britain's bookmakers, and competition for business is tougher than ever. The industry as a whole lost more than 60 million pounds a year ago as a large number of races were won by the favorite, and the outcome of next week's sport will be crucial in determining betting companies' first-quarter results.

To gain new customers, the Paddy Power brand will offer customers refunds in the form of free bets if their selection finishes second in most of next week's races. But Corcoran said customer recruitment is not the main objective.

“The ambition at the start of the Cheltenham week is to make money,” he said. “We hope to trade profitably through the week.”

The bookmaker plans to spend about the same as last year on marketing of the event, though the CEO said it expects to do so more efficiently. A year ago, the merger by which the company was created was only five weeks old, he said.

Betfair Outages

Efforts are being made to avoid a repeat of recent peak-time outages to the Betfair betting exchange, Corcoran said, with more than 1,000 software engineers working on the bookmaker's products at sites in London, Portugal and Romania.

“There are literally people working around the clock worrying about the load and how busy we are,” the CEO said. “There's an enormous amount of professional pride here to provide the best service to customers next week.”

Results for last year showed underlying earnings before interest, tax, depreciation and amortization of 400 million pounds, in line with the company's guidance.

The shares fell 3.9 percent to 8,440 pence at 9:24 a.m. in London, with analysts pointing to a continued weaker performance in the online gaming division. Online sportsbook stakes rose 9 percent at constant currency rates in the early part of 2017, after growth of 10 percent in the fourth quarter and 16 percent in all of last year.

“Next week is much more important than any of the last number of weeks,” Corcoran said.

To contact the reporter on this story: Paul Jarvis in London at pjarvis@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier